Surrogacy is a deeply personal and life-changing journey, but it’s also a financial commitment involving significant funds. These funds are meant to cover surrogate compensation, medical expenses, and payments to third-party providers. Unfortunately, over the past 20 years, the surrogacy industry has seen multiple fraud cases resulting in millions of dollars lost—often due to mismanaged or improperly secured escrow accounts when best practices are not followed.
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The Risk: When Escrow Goes Wrong
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In June 2024, a shocking case emerged in Texas involving Surrogacy Escrow Account Management (SEAM), an escrow company—not a surrogacy agency—where reports indicated $16 million in client funds went missing. This financial collapse left families and surrogates in distress, highlighting the critical importance of proper escrow management. More recently, a notable case involves SurroConnections, a surrogacy agency that collapsed after allegations of misappropriating client escrow funds. Intended parents discovered that the agency had been holding escrow internally, despite reporting only $100,000 in insurance coverage—far below the millions entrusted to them.
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Sadly, these are not isolated incidents. Historically, and against industry best practices, some surrogacy agencies have held escrow themselves, reporting minimal to no insurance coverage while managing millions in client funds. When these accounts fail, the consequences are devastating.

What’s NOT True

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It’s important to clarify a common misconception:

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Most reputable surrogacy agencies do NOT hold escrow funds themselves. Instead, they use independent, third-party escrow providers. This separation is essential to avoid conflicts of interest and protect all parties involved.

What the Law Says - Several states have regulations to safeguard escrow in surrogacy arrangements:

Illinois: Payments must be placed in an independent escrow account.
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California: Requires an independent, bonded, licensed escrow company or attorney trust account.
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New York: Funds must be held by an independent third-party escrow agent, covering base compensation and anticipated expenses, with consent to jurisdiction in NY for the escrow company. Additionally, in New York, surrogacy agencies must be licensed by the Department of Health.

Most state laws do not require a third party escrow account, however the use of a third party independent escrow account is a surrogacy industry best practice.

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What Should a Proper Escrow Account Have?

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Not all escrow services are created equal. Here’s what you should look for:

Independence – The escrow company should have no affiliation with the surrogacy agency.
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More Than FDIC Insurance – FDIC coverage alone is insufficient for fraud or theft protection.
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Bonding and Insurance – Look for adequate bonding and coverage for fraud, theft, and cyber threats.
Regular Audits – Independent audits ensure compliance and accuracy.
Qualified Professionals – Managed by CPAs or attorneys in good standing.
Transparency – Online access to account activity for parties
Consult an Experienced Surrogacy Attorney – Legal guidance is essential.
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SEEDS Standards – These non-binding best practices regarding escrow accounts include:

Professional staffing (attorneys with trust accounts in good standing)
Bonding and insurance
Independence from agencies
Regular audits
Prohibition of agency-held escrow due to inherent conflicts of interest.

The Bottom Line

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Surrogacy is a journey built on trust. Protecting your financial investment and the financial obligations in the surrogacy process is just as important as safeguarding your emotional one. Always verify that when using an escrow account, your funds are held by a bonded, insured, independent escrow company—and never by the agency itself. When in doubt, consult a surrogacy attorney who understands the complexities of escrow and can guide you toward safe practices

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